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RBI Allows Indian Overseas Investment in Pakistan Under Approval Route

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2012-13/198 · issued 07 Sep 2012 · ~1 min read
Quick answerRBI has permitted Indian parties to invest directly in Pakistan, but only after obtaining prior approval from RBI under the approval route. This reverses the earlier blanket ban on such investments.

What changed

Previously, Regulation 6(2) of FEMA 120/2004 prohibited any overseas direct investment by Indian parties in Pakistan. Now, such investments will be considered under the approval route specified in Regulation 9 of the same notification, meaning each proposal requires prior RBI clearance.

What it means for you

Indian banks and their customers can now explore investment opportunities in Pakistan, but must route all proposals through RBI's approval process. This adds a layer of regulatory scrutiny and potential delays. Banks need to advise clients that no investment can proceed without explicit RBI nod.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

Indian companies seeking to invest in Pakistan, AD Category-I banks handling outward remittances for overseas investment, RBI's Foreign Exchange Department processing approval applications

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Can Indian companies now freely invest in Pakistan?

No. The earlier blanket ban has been lifted, but all investments must go through the RBI approval route. Each proposal will be evaluated on a case-by-case basis.

What is the approval route under Regulation 9?

It means Indian parties must submit their investment proposal to RBI for prior approval. The central bank will assess the proposal before granting permission.

Does this circular change any other FEMA regulations?

The circular states that necessary amendments to the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 are being issued separately. For now, only the investment in Pakistan provision has changed.

📜 Read the original circular — full text as issued by RBI
RBI/2012-13/198 A. P. (DIR Series) Circular No. 25 September 7, 2012 To     All Category – I Authorised Dealer Banks Madam / Sir, Overseas Investment by Indian Parties in Pakistan Attention of the Authorised Dealer (AD - Category I) banks is invited to the Notification No. FEMA 120/RB-2004 dated July 7, 2004 [Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004] (the Notification), as amended from time to time. 2. In terms of Regulation 6 (2) of the Notification ibid, “ Notwithstanding anything contained in these Regulations, investment in Pakistan shall not be permitted.” It has now been decided that the overseas direct investment by Indian Parties in Pakistan shall henceforth be considered under the approval route under Regulation 9 of the Notification, ibid . 3. Necessary amendments to the Foreign Exchange Management (Transfer or Issue of Any Foreign Security), Regulations, 2004 are being issued separately. 4. AD - Category I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully, Dr. (Smt.) Sujatha Elizabeth Prasad Chief General Manager-In-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/198 · issued 07 Sep 2012. The plain-English explanation above is BankPulse’s own independent summary.
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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7555&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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